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I was offered a pension advance. What is this? What should I look out for?

Pension advance offers promise to pay a lump-sum payout to retirees who receive pensions. If you get an offer for pension advance products, be careful.

The payout from a pension advance is made in exchange for all or part of your monthly retirement pension payment. Though you might get a large amount of money up front, in the end you may only be paid a small amount of what you would have earned if you waited to receive your full pension payments.

There are many companies making pension advance offers on the internet, but they are illegal under Federal law for pensions issued by the Departments of Veterans Affairs and Defense to veterans and military retirees. It’s important to always research the terms and conditions to figure out whether their offers will actually help you in the long run. Pension advance offers promise quick money, but the cost can be very high.

Warning: Companies that offer a military pension advance can be invalid. Military pension advance products are considered illegal under Federal Law for pensions issued by the Department of Veterans Affairs and the Department of Defense.

If you are considering a pension advance

Don’t give anyone access or control over your monthly pension payments.

Pension advance lenders sometimes arrange for monthly payments to be automatically deposited in a newly created bank account and then debited to pay back the loan, fees and interest charges. This allows the company to withdraw payments and fees directly from your account. Never give a creditor access to the account where your benefits are deposited.

If you’re asked to sign up for life insurance with the pension advance company as your beneficiary, be cautious.

Pension advance companies sometimes require consumers to sign up for life insurance with the company as the consumer’s beneficiary. You could end up footing the bill for the insurance.

Don’t be fooled by patriotic sounding names, logos or claims of government-backing.

Many companies use patriotic-sounding names or logos to appeal to military or other public service retirees. Some companies try to trick consumers into thinking that their pension advance loan is endorsed by a federal or state government agency.

Do look at other options.

If you’re turning to pension advances because you’re having financial difficulties, consider getting financial coaching or counseling from a professional. Many non-profit credit counseling agencies charge sliding-scale fees so consumers who need help can afford their services.